Cautious markets eye FOMC minutes and NVIDIA report

In focus today

In the euro area, focus turns to the final HICP inflation data for October. We expect the final print to confirm the flash release of 2.1% y/y headline inflation and 2.4% y/y core inflation.

In the US, the minutes from FOMC's October meeting could gather more attention, given the notably diverse views expressed by Fed speakers recently and the recent hawkish tilt in Fed communication. This shift has turned the December rate cut pricing back into essentially a coin flip. We still call for unchanged policy rates in the US at next month's meeting.

NVIDIA's earnings report is set for release, serving as a crucial test of the sustainability of this year's rally in AI-related stocks, particularly as most heavyweight tech stocks have faced increasing pressure. While the surge has captured investor enthusiasm, concerns about stretched valuations and potential signs of a bubble persist. Meanwhile, market sentiment remains cautious as US equities continue their longest losing streak since August.

In the UK, October inflation data is released. It will be very interesting to see whether softer inflation is now the trend or the September print was a fluke. Following weaker labour market data and growth, a December cut from the Bank of England is looking increasingly likely.

Overnight, China will announce its Loan Prime Rates, which normally are only changed to following adjustments to the PBOC's repo rates, which have remained unchanged for some time. As a result, the loan rates are expected to remain unchanged as well. However, we anticipate rate cuts in the coming months, as recent indicators suggest the domestic economy has been losing momentum.

Economic and market news

What happened yesterday

In the US, the ADP's new weekly employment growth, 'pulse', showed that private employers shed an average of 2.5k jobs a week for the four-week average ending 1 November, an improvement from last week's -11k ADP 'pulse'. Although this suggests sluggish job growth with modestly improving momentum, it is unlikely to change much for broader markets.

The Labor Department reported US jobless claims at 232k for the week ending 18 October, closely aligning with estimates based on state-level data. The partial figure was released due to a technical issue, with a department spokesperson confirming to Reuters that the full data series will become available on 20 November.

In Hungary, the central bank (MNB) held its key rate steady at 6.50%, with the monetary council highlighting the importance of a 'careful and patient approach to monetary policy' amid persistent risks tied to elevated inflation, trade policy, and geopolitical tensions.

Equities: Global equities had another weak session yesterday, falling 1.1%, when looking at face value, but underneath the surface it was a healthy rotation into defensives. Energy, healthcare and consumer staples ended the day in the green, while tech stocks declined 1.7%, and consumer discretionary names also suffered. Although the initial reaction to the large capex plans highlighted during the Q3 earnings season was positive, markets now seem to be reassessing the likelihood and implications of those investments, taking tech stocks 8% down since its late October peak. Over the past five trading sessions, cyclicals have underperformed defensives by around 4%, with attention increasingly shifting toward value stocks as well. The S&P 500 fell 0.8%, the NASDAQ dropped 1.2%, while the Russell 2000 was marginally higher at +0.3%. Overnight, Asian equities traded mixed to negative.

FI and FX: The Dollar caught a slight bid yesterday, with EUR/USD trading just below 1.16. Scandies traded to the weaker side through the first half of yesterday's session before turning around in the afternoon with both EUR/NOK and EUR/SEK closing 4-5 figures lower from intraday highs. The sour risk sentiment, with US equities extending their longest losing streak since August, benefitted bonds, with both Treasuries and Bunds trading lower across the curve. Meanwhile, SEK swap rates outperformed EUR yesterday, at the same time as 3-4bp of hikes for 2026 got stripped of, to an accumulated +10bp.